Sponsor Company Owned by Family Trusts - Top Heavy?

[LangLangTPA]

We are trying to determine the following:

A S-Corp owned by a family , Father, Mother, 2 sons, 2 daughters - they all work for the company

Father owns 10% of stock - controls 100% of voting stock

Family Trust A owns 22.5%

Family Trust B owns 22.5%

Family Trust C owns 22.5%

Family Trust D owns 22.5%

The beneficiaries of the trusts are the respective children.

Are the spouses of the beneficiary children Key EE's?

We have never seen this before.

[mphs77]

Key EES or HCEs?

They may be Key due to other standards such as an officer of the S-Corp with sufficient compensation.

HCEs I doubt as that would be double attribution, would it not? First the stock owned by the Family Trust is attributed to the beneficiary of the Trust (the children) and it would take a second attribution to go to the spouse of the children.

[Mike Preston]

I assume the family trusts are grantor trusts, right? If so, the beneficiaries are deemed to own their actuarial interest (translation: much lower than 22.5%), while the Grantor is deemed to own what is not owned by the beneficiaries.

I don't think the way you have described double attribution is the way it works. Double attribution is only precluded if both parts of the attribution are because of family attribution. A beneficiary's interest is not because of attribution.

Spouse of older children more likely to be HCE/Key than younger kids.